Price-Fixing or Charity? Trial of M.I.T. Begins

TimesMachine is an exclusive benefit for home delivery and digital subscribers.

About the Archive

This is a digitized version of an article from The Times’s print archive, before the start of online publication in 1996. To preserve these articles as they originally appeared, The Times does not alter, edit or update them.

Occasionally the digitization process introduces transcription errors or other problems. Please send reports of such problems to archive_feedback@nytimes.com.

The values of competition collided with the virtues of charity today in the opening arguments of a Federal trial in which the Massachusetts Institute of Technology is charged with conspiring with other elite universities to fix prices, stifle competition and make it more expensive to obtain a college degree.

In opening arguments in the long awaited antitrust trial, M.I.T.'s lawyers acknowledged that the institute had shared information for more than 30 years with members of the so-called Overlap Group, which comprised the eight universities in the Ivy League plus M.I.T.

"M.I.T. engaged in Overlap as an act of charity," said the institute's lead lawyer, Thane D. Scott of Palmer & Dodge, a Boston firm. 'No Charitable Act'

Financial aid officers from Overlap met four times a year to agree on how they would distribute millions of dollars in financial aid among needy students. All nine universities agreed to give money only on the basis of need, not merit, and they adopted uniform guidelines for determining that need.

Students admitted to more than one university had their financial aid awards discussed at a special meeting. The universities planning to accept a particular student would then try to agree on the amount they would require the student's family to pay for tuition. In this way, the universities said, the quality of the universities, not the amount of money each was offering, would govern a student's choice of institution.

Lawyers for the Justice Department's Antitrust Division argued that the universities really had their own interest in mind. In opening statements the lead lawyer, D. Bruce Pearson, said the underlying purpose of Overlap was to fix prices, eliminate competition and effectively raise the cost of a degree for thousands of students and their parents.

"And that is no charitable act," Mr. Pearson said.

The Government also argued that in the mid-1960's M.I.T. had belonged to another overlap group, this one consisting of M.I.T. and five other technology oriented institutions, including the California Institute of Technology and the Stevens Institute of Technology. Trial to Last Two Weeks

But M.I.T. pulled out because it found that group members were using the information gathered at the meetings to best M.I.T.'s financial aid offers and lure students away.

Last May, the eight Ivy League members, Brown, Columbia, Cornell, Darmouth, Harvard, Princeton, the University of Pennsylvania and Yale, avoided going to trial by signing a consent decree in which they agreed to stop meeting. M.I.T. refused to sign the decree, insisting that it had done nothing wrong.

Institute officials have argued that the suit by the Justice Department will harm needy students, not help them.

M.I.T. officials said the institute had already spent nearly $1 million preparing for a trial that had so many educators watching with such interest that it was being televised, in part, by the Courtroom Television Network, a cable television company.

The trial is expected to last two weeks but its tone was set early. Federal attorneys tweaked Overlap members for using the phrase "family contribution," which they said was "jargon for family payment." Shared Inside Information

The judge in the case, Louis C. Bechtle, the Chief Judge of the United States District Court for the Eastern District of Pennsylvania, allowed Government lawyers to present evidence that the Ivy League members also shared inside information on tuition increases months before they were announced. M.I.T. wanted this kept out of the record, but Judge Bechtle ruled that it was appropriate in attempting to prove that a conspiracy existed.

As they outlined their cases, lawyers from both sides made it clear that the outcome would rest on the simple question of whether cooperating to provide financial aid was an activity covered by provisions of the Sherman Antitrust Act, which generally is used to cover commercial, profit-making business activities.

The Government argues that the Overlap members sell a product, which is education. Financial aid is a discount on the price and the family payment negotiated at the Overlap meetings is, in effect, the net price charged the student.

M.I.T. maintains that it enjoyed no financial gains but was trying to spread the $25 million a year in its own money that it gives for financial aid to as many needy students as possible.

A version of this article appears in print on , Section A, Page 17 of the National edition with the headline: Price-Fixing or Charity? Trial of M.I.T. Begins. Order Reprints | Today’s Paper | Subscribe